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Self-employment in Canada – Aging and the shift of employment to older age groups led to an increase in the aggregate self-employment rate

Canada has a large group of unincorporated self-employed businesses that play a critical role in the early lifecycle of firms. This study presents summary statistics on the importance of a particular group of the self-employed: those whose primary source of income from employment comes from an unincorporated business.

The unincorporated self-employed measured in this study are those who file the Canada Revenue Agency’s income tax return (the T1 form) and report self-employed income as the primary source of their income.

The study spans the period from 1989 to 2010. This study finds that the rate of self-employment in these unincorporated businesses increased during much of the 1990s, but declined during the post-1998 period. Although this post-1998 decline in self-employment was particularly large among the older age groups, the incidence of self-employment for these older cohorts remained considerably higher than for younger cohorts. Thus, over the entire study period, the aging of the population and the shift of employment to older age groups led to an increase in the aggregate self-employment rate. If these demographic changes had not occurred, the post-1998 decline in the self-employment rate would have been greater than what was actually realized.

Among the unincorporated self-employment categories, the fastest rate of growth between 1989 and 2010 was in the business category, followed by the rental and professional categories. Self-employment in the fishing and agriculture categories declined.

The cyclical trends of the entry to and exit from self-employment accord with a version of the push hypothesis, in that the entry to self-employment was generally higher during the 1990s when labour markets were weaker, and was lower in the late 1990s when labour markets were healthier.

The self-employment of unincorporated businesses is characterized by high annual turnover rates (the sum of entry and exit) of around 70% on average.

Capture d’écran 2015-10-10 à 09.40.52

Chosen excerpts by Job Market Monitor. Read the whole story at Unincorporated Self-employment in Canada, 1989 to 2010

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